Ray, Thanks for the comment and question. 2012 was a little murky to analyze because of the merger; there were two big companies coming together with two different cost structures. At the previous earnings call, an analyst threw out a number of $1 billion in synergies. There was that $697 million in transaction costs too. Taking this $1.697 billion out of the cost structure works out to about 1.8% of sales. Add that to the current operating margin and you get a margin of 4.77%.
Management also indicated that, now that they are double the size, they can get better pricing. This will also drive a better margin.
Just curious, what are the odds HLF gets taken private? Is that the next step for Icahn or is it just smoke? "The Reporting Persons intend to have discussions with management of the Issuer regarding the business and strategic alternatives to enhance shareholder value, such as a recapitalization or a going-private transaction." -Icahn's filing
thanosoh, thanks for the comment and question. I couldn't tell you with any accuracy a fair price for the market. With this article, I wanted to point out that certain fundamentals of the market as a whole (i.e. corporate profitability) might make for glossier reported valuation metrics because there will likely be a reversion to a mean and those metrics will get pressured. The idea is that investors should be cautious right now and take this into account when assessing the risk/reward situation.
Good article. I like the buyback at HGG too. They took out $30 million of stock in the last 9 months on a market cap of $300 million. I believe Charlie Munger is also very fond of buybacks.
"We define discount buyers as customers who have signed up as distributors to enjoy a discount on their purchases; small retailers as product users and sales people who generate modest sales to friends and family; and potential sales leaders as distributors who are proactively developing a business with the intention of qualifying to become a sales leader. In 2009, excluding China, distributor orders for these three general categories were approximately 47%, 36% and 17%, respectively." - 2009 10-K -
Nice article. Haven't been to Santa Monica in a while. Right outside of that Barnes and Noble, I remember seeing a bulldog that would chase down a moving skateboard and then turn it around and skateboard right back to the owner. I believe his name was Tillman. Amazing.
Is Mail Dead? Analysis Of Pitney Bowes (Part 2) [View article]
keu4bike, thanks for the comments and questions. From what I understand, there is a law that caps postage rate increases by the CPI inflation percentage. Every rate may be different but the overall increase cannot exceed inflation.
Where Is All That Natural Gas Going? - Investment Implications [View article]
Nice article. I am unfamiliar with some of these markets. Is coal a world market like oil where companies export overseas? What is the chance that natural gas becoming a world market? Would that cost of transportation crush any sort of overseas export potential? It seems far more complicated than transporting liquids or solids on a cargo ship.
Just curious about how the market is going to develop. Thanks.
hhgregg: Not Only Surviving, But Will Be Thriving [View article]
That is a good question about industry numbers. They are from the manufacturers and not the retailers, which would avoid the Amazon problem. The source is Euromonitor International and you can see the breakdown of company shares there. Sony, for instance, has been hurting. Samsung is doing fine. There is an American company from California, Vizio, that is soaring despite the cyclical downturn in the industry. One of the only American companies in this space; it is a private company.
Good point. But that sounds like a one hit wonder effect though, this cleaning up of the balance sheet of MBS. What about reinvestment risk when banks need to redeploy the funds at lower bound rates?
Look at Wells Fargo's net interest margin recently. It is compressing and they continue guidance of a further decline. Not exactly good for risk taking/lending because it gets harder to absorb loss rates when margins are on the squeeze. Seems like it could be a double edge sword.
An Investor's Guide To Identifying Pyramid Schemes [View article]
This article is great and it sounds like many people believe that the MLM model over-promises, under-delivers, and is one big pyramid scheme. These companies have been around for decades though and none of them have been taken down by the law in any meaningful way.
From an analytic perspective (and that is why we are here at this site), what counts in looking at the viability of these companies is the net number of distributors that exist over time, accounting for inflows and outflows. Many of these companies have survived and thrived over a long time and have not imploded as a pyramid scheme would suggest. That is what counts in assessing company prospects. It is callous and overlooks that many people are left in their wakes, but these companies have not been sidelined by the law in any serious way over time nor have imploded under their own weight.
In Hollywood, there are many more actors that struggle there than there are stars. Does that mean that people will stop going to Hollywood to become actors? No, people will continue to go there to become the next star and there will continue to be even more broken dreams in the future. That is a shame but not illegal.
An Investor's Guide To Identifying Pyramid Schemes [View article]
Great article.
I wonder what are the real retention rates and income levels for the distributors at the various multi-level marketing companies: Nu-Skin, Amway, Avon, Herbalife, etc.
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Management also indicated that, now that they are double the size, they can get better pricing. This will also drive a better margin.
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"The Reporting Persons intend to have discussions with management of the Issuer regarding the business and strategic alternatives to enhance shareholder value, such as a recapitalization or a going-private transaction." -Icahn's filing
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In 2009, that 29% number was 47%.
"We define discount buyers as customers who have signed up as distributors to enjoy a discount on their purchases; small retailers as product users and sales people who generate modest sales to friends and family; and potential sales leaders as distributors who are proactively developing a business with the intention of qualifying to become a sales leader. In 2009, excluding China, distributor orders for these three general categories were approximately 47%, 36% and 17%, respectively." - 2009 10-K -
Barnes And Noble Fell Off A Cliff [View article]
Is Mail Dead? Analysis Of Pitney Bowes (Part 2) [View article]
See here: http://1.usa.gov/XSo6x9
Where Is All That Natural Gas Going? - Investment Implications [View article]
Just curious about how the market is going to develop. Thanks.
hhgregg: Not Only Surviving, But Will Be Thriving [View article]
hhgregg: Not Only Surviving, But Will Be Thriving [View article]
Regarding the loss, there is seasonality in the business; they posted a loss in Q2 in the previous year too.
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Look at Wells Fargo's net interest margin recently. It is compressing and they continue guidance of a further decline. Not exactly good for risk taking/lending because it gets harder to absorb loss rates when margins are on the squeeze. Seems like it could be a double edge sword.
An Investor's Guide To Identifying Pyramid Schemes [View article]
From an analytic perspective (and that is why we are here at this site), what counts in looking at the viability of these companies is the net number of distributors that exist over time, accounting for inflows and outflows. Many of these companies have survived and thrived over a long time and have not imploded as a pyramid scheme would suggest. That is what counts in assessing company prospects. It is callous and overlooks that many people are left in their wakes, but these companies have not been sidelined by the law in any serious way over time nor have imploded under their own weight.
In Hollywood, there are many more actors that struggle there than there are stars. Does that mean that people will stop going to Hollywood to become actors? No, people will continue to go there to become the next star and there will continue to be even more broken dreams in the future. That is a shame but not illegal.
An Investor's Guide To Identifying Pyramid Schemes [View article]
I wonder what are the real retention rates and income levels for the distributors at the various multi-level marketing companies: Nu-Skin, Amway, Avon, Herbalife, etc.